New ways of working will look different for everyone, everywhere. While there is a universal acceptance that today’s workforce wants radical flexibility, what that looks like for each organisation will vary significantly. Striking the right balance between remote working and the collaborative experience will be a challenge for all.
A recent McKinsey blog spotlighted the three types of modern flexibility that workers are demanding: not just on where they work, but also on when, how and even why. McKinsey data shows that, among employees that left the workforce and later returned, nine out of 10 said that having control over where they worked was an important factor and leaders need to give those teams a sense of control over that. Hybrid models with set days in the office might be ‘falsely flexible’ if they don’t actually afford any choice or autonomy.
But McKinsey argues employers have been too focused on addressing changes to where work can be done and have overlooked calls for flexibility on when and how employees work. Employees might want to set their own work days and hours: three out of four employees said that having control over when they work was a key factor impacting their decision to accept their current job.
And then comes the how, which means putting employees in charge of their daily work activities, including how they accomplish tasks. Three out of five in-person employees and four out of five hybrid or remote employees reported to McKinsey that having control over how work is completed was an important reason for taking their current job. One technology, media and telecoms company rewarded employees for improving efficiency, allowing employees that were able to automate time-intensive tasks to choose how to spend that recuperated time.
A global shift
What new ways of working look like for each employee in each organisation depends on the motivations of those involved. A KPMG report, Current Trends in Remote Working, identified different drivers of remote working across regions, with travel restrictions the main reason for remote working in Asia Pacific and employee requests driving new work patterns in EMEA and the Americas.
Globally, one quarter of companies said they were responding to their employees when introducing remote working, with a further 18% saying remote working is brand-defining in the talent market and another 12% viewing flexibility as a means to address the talent shortage. Focusing on the employer brand and the employee value proposition will become more important over time.
At the other end of the scale, a growing number of organisations are championing the office and its many benefits. One example is software development testing company Antithesis who argue that in-person teams have more ideas and those ideas are more creative, people share visual cues that can increase innovation and working together in-person also means we move more. Antithesis’s Director of Operations, Megumi Suzuki, commented that “we’re seeing our engineers volunteering to be in the office environment as much as possible. They want that collaborative, creative atmosphere you just can’t get working alone.”
The four-day-week club
The advancing conversation about when people would like to work includes a growing global movement towards a four-day working week. The movement comes as part of efforts to improve employee wellbeing, reduce stress and boost productivity.
A Bain & Company report, The Working Future, published in January 2022 identified changing motivations among employees whereby gains in living standards over the last 150 years are allowing people to spend less time working. The report cites one study of time use in the UK that found that the average weekly leisure time increased by seven hours for men and five hours for women between 1961 and 2000, while the average time spent caring for children also increased, by four hours a week for both men and women.
In general, as countries grow their GDP, workers gain greater economic freedom to spend time on other pursuits and the importance of work relative to other life factors declines.
Is four better than five?
It is this shift, along with a growing focus on worker wellbeing and reducing stress in order to increase productivity, that has driven a number of employers – and governments – to explore a transition to a four-day week. In April 2022 it was announced that more than 3,000 workers at 60 companies across
Britain will trial a four-day working week in 2022, in what is believed to be the biggest pilot scheme to take place globally. At the start of 2022, the United Arab Emirates became the first country in the world to adopt a national four-and-a-half day working week, making it mandatory for public sector employers to down tools at midday on Friday until Monday morning.
Not only is the intention to improve work-life balance, but also to enhance the country’s economic competitiveness. In February, Belgium announced its employees will be entitled to a four-day working week, as well as the right to disconnect and ignore work messages outside business hours, if they opt into a new scheme. Unlike other countries introducing similar programmes though – including Iceland, Japan, Spain and Scotland – Belgium will still expect employees to do the same number of work hours in a week, just over fewer days. The advantages of such initiatives include happier employees with fewer health issues taking fewer sick days, increases in productivity, better recruitment and retention and a smaller carbon footprint.
Making people happy
“Maintaining good mental health is good for business,” says Amie Crowther-Bali, Consultant at ZEDRA. “Whether learning a new skill, enjoying a hobby, spending time with their loved ones or taking better care of elderly relatives or young dependents, employees tend to be happier working a four-day week and happier employees are often more loyal employees.”
She says four-day weeks can also help promote equality: “Research on the gender pay gap from the UK Government Equalities Office shows that roughly two million British people are not currently in employment due to childcare responsibilities and 89% of these people are women. A four-day working week could help more people to better juggle family and work commitments and thereby open up employment to a greater and more diverse demographic.”
But such an approach will not work for every business and can mean adapting the entire operation if companies need to operate around the clock. And there is a risk that employees are required to work additional hours on the four days
they are working in order to free up one day of time, which could counteract the productivity and wellbeing benefit.
Where to work
According to projections from data scientists at Ladders, remote work is here to stay and is set to increase over time. Their researchers predict 25% of all professional jobs in North America will be remote by the end of 2022, up from 4% before the pandemic and remote opportunities will increase through 2023.
But one size of remote work does not fit all. While working from home saves employees commuting time and money, frees up time for families and offers more flexibility, there are also downsides. Bain’s Future of Work report points out that people can feel cut off from the workplace social life, lack apprenticeship and struggle to manage the
boundary between work and personal time.
The net balance of these factors varies across the population, with 37% of US remote workers wanting to continue to work entirely from home, 43% preferring some kind of hybrid model and 20% wanting to work remotely rarely or never again.
Bain found it is not demographic factors, like age or household situation, that meaningfully influence this variation, but rather personality types and attitudes to work. Furthermore, US workers tend to be more inclined towards working remotely than their counterparts in most other countries, with only 15% of workers in China and 16% of workers in France keen to work entirely from home post pandemic
A KPMG report on Current Trends in Remote Working includes a deep-dive into the different types of remote working and how appetite for various models varies globally. Domestic remote working, most typically involving a hybrid model with some days spent in the office and some at home, is the most popular remote working pattern and dominates in Europe and the Americas. Cross-border short-term remote working, with durations of typically less than 90 days, is also favoured in the Americas, while the Asia Pacific region has a greater focus on virtual assignments and hiring employees abroad, with the percentage of companies considering such patterns more than double the global norm. Temporary cross-border work assignments of more than 90 days remain uncommon, likely as a result of the compliance risks around taxation and creating a permanent establishment.
KPMG notes that it remains to be seen how these patterns will evolve as travel and entry restrictions continue to ease, but it is clear that regional trends and variations will play a key role as companies develop global ‘work from anywhere’ models.
We are witnessing a complete reimagining of the geography of work, which has significant implications for recruitment. Remote work materially expands the reach of a company’s hiring efforts, with research by The Conference Board published by Economic Modelling showing that over 40% of jobs posted by West Coast American tech companies are now being posted outside the West Coast. Furthermore, employees have more freedom to separate home from work, doing big city work in small town locations. As more remote workers wash over from California, the median home price in Boise, Idaho, has jumped to ten times the median income, according to Economic Modelling.
For employers the result is twofold: more competition, because talent is being targeted by suitors from much farther afield; but also more opportunities, because hiring efforts can quite literally go global.
Future proofing compliance
While cross-border remote working was less common in the earlier part of this decade, calls for broader ‘work from anywhere’ policies have gathered pace as borders have opened up. If employees choose to spend some or all of their time in a jurisdiction where the company does not typically operate, that creates significant legal and tax risks for the business. A US employee working from home in another state effectively means the employer has an office in the state, creating corporate tax obligations as well as the need to observe local labour laws, income tax laws and benefits rules. Some states dictate that employers must offer retirement plans, so those issues must be considered too; the issues being even further compounded where workers are in different countries.
The tax risks of cross-border working can also be considerable, as a report by law firm Baker McKenzie sets out. If an executive is taking key management decisions or an employee is required to work remotely from a jurisdiction where the employer is not tax resident, that can impact the tax residence of the employer and create transfer pricing issues, permanent establishment exposure and wage tax or social security withholding obligations.
Kiki Stannard, Managing Director at ZEDRA, says: “If someone that was based in the UK now wants to work from their gîte in the south of France, that raises questions about moving them onto French payroll, making sure the company is registered in France and paying French social security. Social security is higher in France than it is in the UK, so that is an additional liability that the employer had not budgeted for. Then there is withholding tax to consider and benefits like private healthcare that will no longer cover unless a new policy is taken out. There are a huge number of issues that employees do not think about.”
If the employee actively creates value in the new jurisdiction, that country will want to tax that value, giving rise to a swathe of tax exposures. For this reason, many businesses opt to employ foreign workers under PEO arrangements, though these do not address all exposures and can still leave the company open to tax and reputational risk.
Kiki Stannard says: “Each time an employee makes a request to work from a different jurisdiction, somebody has to assess that risk and consider all the legal, HR, financial, tax and PR elements to granting that request. Those decisions leave a legacy and there is a risk of building up exposure within the business if those processes are not handled expertly.”
Companies are advised to monitor employees’ remote place of work carefully, assess the tax and other legal risks in respective jurisdictions and design a remote working policy that takes these things into account. ZEDRA recommends employees are kept informed and trained about the tax and legal consequences of cross-border remote working and says companies should register with relevant tax and social security authorities and consider setting up branches in host countries if necessary.
The need for genuine flex
Blanket ‘work from anywhere’ policies are often troublesome, because for many reasons it may be okay for one employee in a certain role to work from a certain country but not for someone else to decamp elsewhere. Instead, the solution lays in sophisticated flexibility that takes account of different circumstances and delivers a fair and accountable solution to each situation.
There is no escaping the fact that employers will continue to look internationally to recruit the best technical expertise for their businesses, or that
employees will continue to seek greater flexibility in working arrangements. Companies will have to take a new approach to managing, training and developing people as the working from anywhere trend continues to challenge the old ways.